Why Digital Fashion Matters
“We’re in the midst of a technological revolution. We all know it, we talk about it, but we have to live it. The most difficult step is just to go for it.” — Helmut Lang, on being the first designer to unveil a collection on the Internet (1998)
TL;DR: We at TCG Crypto are thrilled to be backing what we believe are two of the most innovative companies in digital fashion, DRAUP and Tribute Brand. We share our excitement for the space and outline our thesis on where we believe digital fashion is headed in the piece below.
Originally published on the TCG Crypto Mirror blog.
What was your first experience buying digital clothing online? My memories from my first few years on the Internet are blurred across Webkinz outlet shopping, RuneScape party hats, and Club Penguin monthly catalogs. A few years later, as I downloaded Snapchat for the first time, I remember trying on dozens of outfits for my Bitmoji to wear. And even more recently, I’ve swiped across Instagram filters to see which pair of AR sunglasses would suit me best (so far, I’ve settled on this pair of Nouns glasses).
I commonly hear people say that digital fashion is the future — the “next big thing” in consumer Internet. I’d argue it’s already here, and as people continue to live and display more of their lives online, I believe the market for digital fashion will only get bigger.
Digital fashion largely had its origins in gaming (to no surprise: both industries share common ground as first-movers via emerging technologies to create new forms of self-expression). There are 3.4 billion gamers worldwide, and the market for in-game “skins” (cosmetic add-ons) is estimated to be ~$40 billion a year, compared to the global apparel market at $1.5 trillion. We’ve also seen Internet users move from interactive to immersive over the last few years, spending increasing amounts of time on platforms like Roblox and Fortnite. Brands have followed suit, with Louis Vuitton, Versace, and 100 Thieves debuting virtual goods in League of Legends, ComplexLand, and Animal Crossing, respectively. Remember how the next big thing often starts out looking like a toy?
But digital fashion certainly isn’t limited to just gaming. Back in 2013, Japanese virtual pop star Hatsune Miku was dressed by Marc Jacobs for an upcoming arena tour. The phenomenon continued in 2016, when virtual influencer Lil Miquela blew up on Instagram, working with brands like Prada and Calvin Klein and eventually being named one of TIME Magazine’s 25 Most Influential People on the Internet in 2018.
The Internet has already permanently altered the way we buy our clothes, and social media has changed the way we wear them. On average, an item of clothing is worn 7 times before being thrown away. As of 2019, the fashion industry accounts for 10% of global carbon emissions (more than all international flights and maritime shipping combined). Last year, sixteen fashion brands (including Hanes, H&M, Levi Strauss & Co., and Nike) collectively recorded profits of at least $10 billion while paying their garment workers an average of $147 a month.
Fashion’s equity problem doesn’t stop there. More than 80% of majors from top fashion schools are female, but only ~14% of the top 50 major fashion brands are run by a female executive (2018). And for new entrants to the space, it’s not uncommon to be faced with high production costs or an “illuminati of tastemakers” restricting exposure.
We believe digital fashion solves these issues. Companies like MetaFactory are creating physical clothes with digital counterparts, while fashion houses like The Fabricant are designing digital clothes for avatars. For the first time, the industry feels equitable: anyone in the world can create digital clothing, as long as they have a computer and software skills. There’s also no need for gated fashion weeks when traction is attainable via social media. And with a blockchain providing proof of ownership, designers can be fairly compensated for their work.
Digital fashion is, at its core, an identity business. 60% of Gen Z and 62% of Millennials believe that how they present themselves online is more important than how they present in person. What we wear is (and always has been) a medium for understanding who we are and what we care about.
So where does web3 come in? We’ve already seen exciting proof points for the industry, from the first ever digital couture to be auctioned on the blockchain in 2019 to these RTFKT sneakers raising $3.1 million in under seven minutes in 2021. But today, web3 fashion is only a fraction of a percentage of the physical fashion industry, due to what we believe is a tradeoff in utility (being able to wear the garment where it can be admired, like Fortnite or Instagram) and monetization (being able to own the garment, but not having anywhere to showcase it). Our view is that the unlock for web3 digital fashion will be in creating functionality for the digital fashion as a garment (I can try it on; I can wear it when, how, and where I choose) as well as functionality for the digital fashion as an asset (I can sell or trade it; I can make money from my digital fashion through renting it or wearing it in a public space).
The physical fashion industry often falls victim to the Horseless Carriage Syndrome, where new technologies are viewed only in the context of what came before them (the same way cars were first called horseless carriages). This is precisely why we are excited to be making investments in the space. The use cases for digital fashion are limited today, but will continue to expand over time, perhaps to the point that we’ll even take the word digital out of the name. We are honored to back what we believe are two of the most innovative companies in the space, DRAUP and Tribute Brand.
DRAUP operates under the belief that financial returns form the foundation of a new ecosystem, and is focused on three key value propositions: a marketplace to buy the best of digitally-native clothing, a space to show and wear the digital clothes you buy, and routes to make money from your digital fashion (rent-to-earn, wear-to-earn, etc.). DRAUP is led by Dani Loftus of This Outfit Does Not Exist, a platform powering the shift towards digital fashion through education, exploration, and exhibit. We are thrilled to be on board for the journey. If you are interested in learning more or potentially joining the team, DRAUP is hiring! Get in touch with Dani here.
Tribute Brand launched in April 2020 and has quickly emerged as a leader in the global digital fashion market, selling out their drops and partnering with luxury fashion houses like Jean Paul Gaultier and Carolina Herrera along the way. Led by award-winning digital fashion creative Gala Marija Vrbanic, the Tribute Brand team has built a best-in-class digital fashion brand, with prior expertise across traditional fashion, CGI 3D modeling, blockchain, and UX design. Learn more about the fundraise here, and explore open roles (across engineering, design, research, and community) here.
Digital identities are an extension of our self-expression. In the future, they will be our most valuable assets. We are delighted to support this thesis and back both DRAUP and Tribute Brand as they push the fashion world to new limits.
“The internet is the new house of fashion.” — Donatella Versace
TCG Crypto is an investor in DRAUP and Tribute Brand. None of the information discussed herein is intended to be, or should be construed as financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security.